Stocks slump on weak bank results

Disappointing results from Bank of America and Citigroup tugged the stock market to its fifth straight loss Thursday.

Oil prices continued their slide, and U.S. government bonds jumped.

Weak revenue from trading pulled down Bank of America's profit 11% in the fourth quarter. The bank's earnings and revenue fell short of Wall Street's estimates. BofA's stock sank 84 cents, or 5%, to $15.20.

Discouraging news on the global economy and falling oil prices have rattled investors recently, even as the bull market for stocks closes in on its sixth anniversary.

The stock market's fall is likely to prove temporary, another pause in a long climb higher, said Henry Smith, chief investment officer at Haverford Trust.

“Bull markets don't die because of age,” he said. “They die almost always in anticipation of the next recession. But where are the indications of that?”

Despite slowing growth overseas, the U.S. economy continues to improve. Last week, the government said that the unemployment rate declined to 5.6% in December, a six-year low. On Thursday, the New York branch of the Federal Reserve reported manufacturing expanded in the region.

“Lately, it has … been the economy versus the markets,” said Jack Ablin, the chief investment officer at BMO Private Bank. “There's a divergence. The financial markets are worried about the impact of plunging oil prices, at the same time the economic backdrop in the U.S. is improving.”

On Thursday, the Standard & Poor's 500 index fell 18.60, or 0.9%, to close at 1,992.67. The Dow Jones industrial average dropped 106.38 points, or 0.6%, to 17,320.71, while the Nasdaq composite fell 68.50, or 1.5%, to 4,570.82.

A volatile day of oil trading ended with crude falling $2.23 to end at $46.25 a barrel. Earlier in the day it jumped over $51. Brent crude, a benchmark for international oils, fell $1.02 to close at $47.67 in London.

Smith said he isn't troubled by the drop in oil. “Lower oil prices are good for the vast majority of the economy,” he said. “It can't be bad because consumers in the U.S. and globally benefit from lower energy costs.”

With JPMorgan Chase posting a drop in profits on Wednesday, the fourth-quarter earnings season has had a rough start. But that shouldn't come as a surprise. Analysts have spent the past few weeks trimming their forecasts. They now predict big corporations will report earnings growth of 4%, according to S&P Capital IQ, down from forecasts of 6.6% on December 1. Overall sales are expected to rise just 2.1%, largely the result of sliding revenue for oil companies.

Citigroup sank $1.82, or 4%, to $47.23 following news that the bank's quarterly profit fell 86%. The bank booked legal and restructuring charges at the end of last year to cover costs tied to a number of investigations. Analysts had expected stronger results.

Switzerland's central bank rocked currency markets on Thursday when it abandoned efforts to keep the Swiss franc artificially low against the euro. The Swiss currency soared in response. But Swiss stocks took a pounding on the prospect of the country's exports becoming more expensive to overseas buyers.

Back in the U.S., Radio Shack's stock plummeted 36% following a report in The Wall Street Journal that the struggling electronics retailer could file for bankruptcy protection as early as February. The company's shares fell 15 cents to 26 cents

Target announced that it was closing all of its stores in Canada, saying it couldn't find a realistic way for the division to turn a profit before 2021. Target's stock rose $1.34, or 2%, to $75.67.